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Key Whitewater Figure to Come Forward : Probe: Susan McDougal, a partner in the land deal, is scheduled to appear at a press conference. She is remembered as colorful, free-spending.

March 12, 1994|SARA FRITZ and JOHN BRODER | TIMES STAFF WRITERS

LITTLE ROCK, Ark. — She is the mystery woman of the Whitewater saga--the one key witness who has as yet said nothing publicly about President Clinton's Ozark Mountain land investment.

Susan McDougal, 38-year-old former wife of failed savings and loan owner James B. McDougal and former partner with the Clintons in the Whitewater Development Corp., is in a position to know about many unexplained aspects of the controversy now engulfing the White House.

Among other things, she could shed light on the central question in the case: Did Clinton and First Lady Hillary Rodham Clinton personally benefit from savings and loan money funneled illegally into the Whitewater real estate venture?

In addition, McDougal's version of the Whitewater story is likely to be every bit as colorful as it is informative.

A feisty, fun-loving woman, she is remembered vividly here because she appeared in hot pants and riding a white horse in a television commercial for one of her then-husband's real estate developments and because her free-spending habits helped to bankrupt his savings and loan, costing U.S. taxpayers at least $47 million.

On Monday, McDougal, who has eluded reporters since the Whitewater controversy began, is promising to break her silence. Her lawyer, Bobby McDaniel, has scheduled a press conference for his client, who is preparing to tell her story to Whitewater special counsel Robert B. Fiske Jr.

Because McDougal has been implicated in many of the misdeeds involving her ex-husband's Madison Guaranty Savings & Loan and Whitewater Development Corp., she is expected to seek immunity in exchange for her testimony. McDaniel acknowledged that he already has talked with the special counsel.

According to those who have talked with her recently, McDougal realizes that she is in a position to stir up trouble for the President and she is anxious to defend herself.

But it is not yet clear whether Clinton should fear her testimony.

While McDougal possesses inside knowledge of the Whitewater project that could substantially assist Fiske with his investigation, her friends and lawyers say she remains fiercely loyal to the Clintons and insistent that she is not guilty of any wrongdoing.

"Susan McDougal did not knowingly do anything wrong, and no one has shown that she did anything wrong," McDaniel said.

An acquaintance added: "I don't think she feels that she has any real smoking-gun evidence, but they are going to have to give her immunity to get her side."

McDougal not only denies any fault in the Whitewater matter, she also insists that she is not guilty of more recent charges pending against her in Los Angeles that she stole $200,000 from famed conductor Zubin Mehta while working as his personal bookkeeper after she left Arkansas.

Leonard Levine, her Los Angeles attorney, said McDougal is confident she will be proven innocent of charges of embezzling from Mehta.

Clearly, McDougal's story is one of rags to riches and back to rags.

From humble beginnings in Camden, Ark.--one of seven children born to a soldier father and Belgium-born immigrant mother--she became a highly visible Little Rock businesswoman with a flashy Jaguar and a reputation for what one of her friends described as "a shop-till-you-drop philosophy."

Between 1984 and 1986, according to a bank examiner's report on Madison Guaranty, she collected more than $1.5 million from the thrift, acting as the owner of a subsidiary advertising agency, known as Madison Marketing, that drained millions of dollars from the savings and loan.

She collected 15% commissions for doing the thrift's advertising and public relations work, but she actually hired other firms to carry out the work, according to the government's assessment of her role.

In her high-roller days, McDougal is said to have spent $1 million renovating and decorating a $200,000 house that she and her former husband bought in West Little Rock.

Her expensive tastes also dictated the expenditure of $600,000 to convert a former dry-cleaning establishment in a historic section of the city into an Art Deco headquarters for Madison Guaranty.

"Everything was paper hats and horns--a party all the time," said an acquaintance familiar with McDougal's business practices. "She thought her subdivisions were making money even when they were losing money."

Now, McDougal is back on hard times--unemployed and living with her boyfriend, Eugene (Pat) Harris, a former Madison Guaranty real estate agent, in Nashville. By all accounts, she spends her days searching for work, talking with her lawyers and avoiding the reporters who frequently stalk her.

"Every day is not a party now," commented one friend.

McDougal got to know the Clintons through her then-husband, whom she met in 1974 when she was a young drama student and he was a teacher at Ouachita Baptist University in Arkadelphia, Ark. She encountered him one day when she was trying to get into a locked office at the school and he kicked in the door for her.

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